The government has avoided millions of dollars in payouts after a court ruled that a dole recipient was not entitled to receive rebates for rent and rates that she never paid.

The Court of Appeal yesterday overturned a lower court ruling that Tang Yee-yu, who is in her 60s, should get HK$2,397 in rebates under a government relief scheme - even though she does not pay rent or rates.

The government pays rent and rates directly for tenants on Comprehensive Social Security Assistance, or welfare. During periods when the Housing Authority waives the charges, the government stops paying them. This means while people paying from their own pockets had more money to spend, dole recipients did not benefit the same way.

Tang claimed she was entitled to a payment from the Social Welfare Department, equivalent to the amounts waived, because the waivers were meant to benefit her and not the department.

In September, the Court of First Instance ruled in Tang's favour, saying the department - which paid Tang's rent and rates - had benefited unjustly by 'saving a necessary expenditure at the expense of the claimant'. But that was overturned yesterday by the Court of Appeal.

The appeal judges ruled that the waiver was a reimbursement, and welfare recipients who already benefited from rent-free accommodation could not benefit a second time.

Chief Judge Mr Justice Andrew Cheung Kui-nung wrote in a unanimous judgment: '[The special grant] is paid to a recipient on a need basis. It seeks to reimburse the recipient for the actual rent paid.'

'In the case of a rent reduction or waiver, the Comprehensive Social Security Assistance recipient simply continues to enjoy his or her rent-free accommodation just as before,' Cheung wrote. '[Even] without the rental reduction or waiver, he or she has already been relieved of the obligation to pay rent by reason of the rent allowance,' the judge wrote.

Mr Justice Peter Cheung Chak-yau wrote: 'The mere fact that the [Social Welfare Department] may in consequence save some money and have a surplus in its account does not mean that what has been saved belonged to the applicant.'

'The disposal of the saving or the surplus is something that is between the [Social Welfare Department] and the administration, and is not of the applicant's concern.'

The judges ruled that Tang was not entitled to HK$2,397 - equal to a rates rebate for the full year in 2002 and a rent rebate in February 2007, when payments were waived.

The Social Welfare Department welcomed the judgment. A spokesman said it would ask Tang to return the HK$2,397 that had been paid to her following the first judgment in her favour.

The government was anxious to win the appeal because of the far-reaching effects of the judgment. About one-fifth of the 650,000 public-rental households are on welfare. Hong Kong waived rent for seven months between 1997 and last year, so the department might have been obliged to pay out HK$807 million for rents alone had it lost the case.

3.4%

The unemployment rate in Hong Kong from September to November. It reached an historical high of 8.6 per cent in June 2003